SECTION – A (MACROECONOMICS)
Q1. In order to control the money supply in the economy, the Central Bank may ________. (Choose the correct alternative) (1)
(A) buy securities in the open market
(B) sell securities in the open market
(C) reduce cash reserve ratio
(D) reduce repo rate
Ans. (D) reduce repo rate
Q2. State whether the following statement is true or false : ‘‘Government Budget is an important monetary policy instrument.’’ (1)
OR
Disinvestment is a ________ (capital/revenue) receipt of the government. (Choose the correct alternative)
Ans. The statement is False.
OR
Disinvestment is a capital receipt of the government.
Q3. Effective demand is defined as ________. (1)
(Fill in the blank with the suitable definition)
Ans. Effective demand is defined as that level of output and employment where aggregate demand is equal to aggregate supply.
Q4. Two components of money supply are ________ and ________. (1)
(Fill in the blanks with correct answers)
Ans. Two components of money supply are currency held with public and demand deposits with commercial banks.
Q5. State whether the following statement is true or false : (1)
‘‘Expected obsolescence is included in depreciation.’’
Ans. The statement is true.
Q6. Fiscal deficit can be estimated using the formula ________. (1)
(Fill in the blank with the correct formula)
Ans. Total Expenditure – Total Receipts excluding borrowings
Q7. According to the theory of Keynesian Economics, the value of Average Propensity to Consume can never be ________.
(Choose the correct alternative) (1)
(A) zero
(B) unity (1)
(C) more than one
(D) less than one
Ans. (A) zero
Q8. ________ is one of the most important sources of demand for foreign currency. (Fill in the blank with the correct answer) (1)
Ans. Import of goods and services is one of the most important sources of demand for foreign currency.
Q9. State whether the following statement is true or false : ‘‘As per Keynesian theory in an economy, full employment can never exist.’’ (1)
Ans. The statement is False.
Q10. Define ‘Trade Surplus’. (1)
Ans. Trade Surplus refers to the excess of the receipts of exports of visible items over the value of payments for imports of visible items.
Q11. ‘‘Final goods include only those goods which are consumed by the households.’’ Defend or refute the given statement with valid reason.
OR
‘‘Circular flow principle is based on the assumption that one’s expenditure will become other’s income.’’ Explain the given statement. (3)
Ans. The given statement is refuted. Final goods include those goods which are either consumed by the households or purchased by a producer for investment purposes.
OR
In a two sector economy households and firms exist to run the economy. Households render factor services to the firms and earn factor incomes from them. Whereas, firms produce and sell goods and services to households and earn their income by an equal magnitude. Thus, in a circular income mode, the axiom that one’s expenditure is other’s income holds true.
Q12. Justify the following statement, with valid reason.
‘‘Ex-ante Aggregate Demand is always equal to Ex-ante Aggregate Supply.’’ (3)
Ans. Ex-ante Aggregate Demand is equal to Ex-ante Aggregate Supply only when the economy is in equilibrium. At under-employment equilibrium level, when Ex-ante Aggregate Demand falls short of Ex-ante Aggregate Supply, it will lead to accumulation of unplanned inventories. Hence the producer will reduce employment leading to reduction in output and income till the two forces becomes equal to each other and vice versa.
Q13. Using a hypothetical numerical example, explain the process of credit creation by a commercial bank. (4)
OR
‘‘Central Bank acts as the banker to the government.’’ Elaborate the given statement.
Ans. Refer to CBSE 2019 SOLUTION SET 1 Q23.
OR
Refer to CBSE 2014 SOLUTION SET 1 Q27.
Q14. ‘‘India is taking huge leaps in the index of Ease of Doing Business, as a result many MNCs are shifting their production base to India.’’ In the light of the above statement, comment upon the flow of foreign exchange and its likely impact on the Indian Economy. (4)
Ans. India, with greater ease of doing business, may attract many more MNC’s to shift their production base to India, thereby increasing the inflow of foreign exchange (say $) to the Indian economy. This increase in foreign direct investments (FDI) by MNCs will lead to increase in the supply of foreign exchange in India leading to a fall in the rate of foreign exchange, i.e. Indian Rupee (Rs.) may appreciate. Increase in FDI will result in increase in production and hence may also generate employment opportunities in the Indian economy.
Q15. (a) Define ‘Revenue Expenditure’.
(b) Distinguish between Direct tax and Indirect tax. (1+3)
Ans. (a) Revenue Expenditures are those expenditures of the government that neither create any assets nor reduce any liabilities of the government.
(b) Refer to CBSE 2017 SOLUTION SET 1 Q23.
Q16. (a) Calculate the value of ‘Change in Stock’ from the following data : (4)
(b) Define Real Gross Domestic Product. (2)
OR
(a) Discuss briefly the three components of ‘Income from Property and Entrepreneurship’. (3)
(b) What are ‘externalities’ ? State its types with suitable examples. (3)
Ans. (a) Change in stock = (ii) + (vi) + (v) - (iii) - (i)
=200 + 100 + 40 – 10 - 400
= (-) ₹70 Crores.
(b) Real Gross Domestic product is the sum total of the money value of all final goods and services produced in an economy during the year estimated at some given base year’s prices.
OR
(a) Income from property and entrepreneurship (operating surplus) includes:
i) Rent/Royalties – Rent is that part of national income which arises from ownership of land and building. Royalty refers to income received for granting leasing rights of sub-soil assets.
ii) Interest – It refers to amount received for lending funds to a production unit.
iii) Profit – It is the reward to the entrepreneur for his contribution to the production of goods and services.
(b)Externalities refers to benefits or harms of an activity caused by a firm or an individual, for which they are not paid or penalized.
There are two types of externalities:
a)Positive externalities – Activities which result in benefits to others. For example, use of public parks by people for pleasure for which no payments are made by the public which in turn increases welfare through positive effect on health.
b)Negative externalities – Activities which result in harm to others. Environmental pollution caused by industrial plants. Such pollution reduces welfare through negative effect on health.
Q17. In an economy, if initial investments are increased by Rs.100 crores, discuss the working of investment multiplier presuming marginal propensity to consume is 0·8. (6)
Ans. The working of investment multiplier is based on the principle that one’s expenditure is another’s income.
Given initial investment = ₹ 100 crores and MPC = 0.8,
Now suppose MPC is 0.8, change in consumption will be Rs.80 crores. This will continue till total increase in income becomes k times the increment of investment.
K= 1 / (1 – MPC) = 1 / (1 – 0.8) = 1/ 0.2 = 5
∆Y= K x ∆ I = 5 x 100 = ₹ 500 crores
SECTION – B (INDIAN ECONOMIC DEVELOPMENT)
Q18. During India’s first seven five-year plans, the Government of India adopted ________ policy to protect domestic industries.
(Fill up the blank with correct answer) (1)
Ans. During India’s first seven five-year plans, the Government of India adopted import substitution policy to protect domestic industries.
Q19. Mention any one advantage of Organic farming. (1)
Ans. It provides safe and healthy food.
Q20. State whether the following statement is true or false : ‘‘In the past few decades, primary sector has created maximum jobs in India.’’ (1)
Ans. The statement is False.
Q21. ________ was the predecessor organization to World Trade Organization (WTO). (Choose the correct alternative) (1)
(A) International Bank for Reconstruction and Development (IBRD)
(B) International Monetary Fund (IMF)
(C) Reserve Bank of India (RBI)
(D) General Agreement on Tariffs and Trade (GATT)
Ans. (D) General Agreement on Tariffs and Trade (GATT)
Q22. India is not a member of which of the following regional/global economic grouping? (Choose the correct alternative) (1)
(A) European Union
(B) BRICS
(C) G-20
(D) SAARC
OR
Pakistan introduced its economic reforms in the year ____________ . (Choose the correct alternative) (1)
(A) 1974
(B) 1976
(C) 1978
(D) 1988
Ans. (A) European Union
OR
(D) 1988
Q23. State whether the following statement is true or false: ‘‘Self-Help Groups (SHGs) are an example of a microcredit organization.’’ (1)
Ans. The statement is True.
Q24. The main aim of ‘Great Leap Forward’ was to ensure rapid increase in ________ (primary/secondary/tertiary) sector in China. (Choose the correct alternative) (1)
Ans. The main aim of ‘Great Leap Forward’ was to ensure rapid increase in secondary sector in China.
Q25. State any one outcome of implementation of Economic Reforms in India in 1991. (1)
Ans. Any one outcome is greater inflow of investment.
Q26. Arrange the following events in chronological order and choose the correct answer from the given alternatives: (1)
(i) Establishment of People’s Republic of China
(ii) (ii) Creation of Pakistan
(iii) (iii) First Five-Year Plan of India
(iv) (iv) First Five-Year Plan of China
Alternatives:
(A) (i), (iv), (ii), (iii)
(B) (iii), (ii), (i), (iv)
(C) (ii), (i), (iii), (iv)
(D) (iv), (iii), (ii), (i)
Ans. (C) (ii), (i), (iii), (iv)
Q27. First Industrial Policy Resolution of Independent India was announced in the year ________. (Fill in the blank with correct alternative) (1)
(A) 1947
(B) 1948
(C) 1951
(D) 1956
Ans. (B) 1948
Q28. ‘‘Human Capital Formation gives birth to innovation, invention and technological improvements.’’ Do you agree with the given statement? Support your answer with valid arguments.
OR
Critically evaluate the role of rural banking system in the process of rural development in India. (3)
Ans. The given statement is correct. Human Capital Formation not only increases the productivity of available human resources but also stimulates innovation and creates ability to adopt new technologies. Investment in education creates ability to adopt newer technologies, facilitates invention and innovation since educated workforce generally adapts to modern technologies and innovation.
OR
Rural banking system has created a positive effect on rural farm and non-farm output, income and employment. It helps farmers to avail services and credit facilities and a variety of loans for meeting their production needs. With the help of credit facilities provided through rural banking system, India has achieved food security which is reflected in the abundant buffer stocks of grains. However, our banking system is not completely free from shortcomings. Except commercial banks, other formal institutions have failed to develop a culture of deposit mobilization by lending to worthwhile borrowers and effective loan recovery. Agriculture loan default rates have been chronically high as farmers have failed to pay back loans either due to poor economic condition or lack of willingness to pay back loans. Thus, the expansion and promotion of the rural banking sector has not proceeded at line desired pace after reforms. Banks need to change their approach from just being lenders to building up relationship banking with the borrowers in order to improve the situation. Farmers should be encouraged to inculcating the habit of thrift and to utilize financial resources efficiently for productive purposes.
Q29. Compare and analyze the given data of India and China, with valid reasons: (3)
Ans. a) The given data shows that China could arrest its annual population growth rate with the implementation of some stringent measure in late 1970’s like the introduction of one child norm. This step has been instrumental in controlling the growth of population in China. India stands virtually more than double to China at its annual population growth rate of 1.2% as compared to China’s annual population growth rate of 0.5% pa.
b) The social dynamics of both the countries are similar to each other; sex ratio is low and biased in both the countries due to preference for male child. Whereas, India stands at 929 females per 1000 males, China is not far ahead at 941 females per 1000 males.
Q30. ‘‘India is often called as outsourcing destination of the world.’’ Discuss the prime reasons for this name given to India. (4)
OR
State the meaning of import substitution. Explain how import substitution can protect the domestic industries.
Ans. Outsourcing is good for India because of the following reasons:
1)Outsourcing helped India to receive new ideas and technological knowledge from developed countries.
2)Employment generation is one of the most important aims of any developing nation. It helped to create new avenues for generating employment in India.
3)It improved human capital in India to a great extent with its positive effects. Employees received necessary training which enabled to develop skills and increased their scope for job advancement.
4)Infrastructure facilities in urban cities were developed to suit the requirements of BPO activities. This enabled India to benefit with high-end technology and best breed of infrastructure to remain a successful destination for outsourcing.
OR
In the First Seven Plans, India followed an inward looking trade strategy. This strategy aimed at replacing or substituting imports with domestic production is called Import Substitution, e.g., instead of importing electronics goods made in a foreign country, industries would be encouraged to produce them in India itself. Thus, the government protected the domestic industries from foreign competition through this policy. Protection from imports took two forms : (i) Tariffs i.e., a tax on imported goods to make imported goods more expensive and discourage their use. (ii) Quotas as they specify the quantity of goods which can be imported.
Q31. (a) State any one positive contribution made by the British in India.
(b) Indicate the volume and direction of foreign trade of India at the time of Independence. (1+3)
Ans. (a)One positive contribution made by the British in India is the Introduction of Railways.
(b) The restrictive policies of commodity production, trade and tariff pursued by the colonial rule adversely affected the volume and direction of India’s foreign trade, as:
i) British maintained monopoly control over India’s exports and imports.
ii) More than half of India’s foreign trade was restricted to Britain while the rest was allowed with a few other countries like China, Ceylon(Sri Lanka) and Persia (Iran)
iii) India had huge export surplus during the colonial rule.
Q32. Define any two of the following: (2+2)
(a) Absorptive Capacity of Environment
(b) Carrying Capacity of Environment
(c) Poverty Line (in terms of Calorific values)
Ans. (b) Carrying capacity of environment – It implies that the resources extraction is not above the rate of regeneration of the resources and wastes generated are within the assimilating capacity of the environment.
(c) Poverty Line is the cutoff point which divides the population of the country as poor and the non-poor. It can be determined in terms of calorie intake and monthly per capita expenditure (MPCE). According to this a minimum intake of 2400 calories per person per day in rural areas and 2100 calories person per day in urban areas is needed.
Q33. (a) Why are less women found in regular salaried employment? (3)
(b) Analyze the recent trends in sectoral distribution of workforce in India: (3)
Ans. (a) Less women are found in regular salaried employment due to the following reasons:
(i)Lack of Education facilities - Female education is not given due importance in India and hence majority of the women in India do not have the educational qualification and professional skills required for regular salaried employment.
(ii) Wage Discrimination - Gender based wage discrimination is prevalent in India which demotivates the women in regular salaried employment and they prefer being at home or go for self-employment opportunities.
(iii) Security Issues - Rise in crime against women has also been a reason of women withdrawing from regular employment due to security concerns. Late working hours in private sector firms and MNCs are not found suitable by most of the women.
(b) The given data indicates that over the given period, the proportion of workforce in primary sector has gone down rapidly. Whereas, the employment share of both secondary sector and the services sector has increased. While the share of secondary sector has gone up by approximately 9% recently, the corresponding figure for services sector has gone up by approximately 7%.
Q34. (a) ‘‘Ujjwala Yojana has been a game changer for rural India.’’ State any three conventional fuels being targeted under the LPG cylinder distribution scheme (Ujjwala Yojana).
(b) ‘‘Indian Health System needs a stronger dose of public expenditure to cure itself.’’ Justify the given statement with valid arguments. (3+3)
OR
Critically examine the results of Poverty Alleviation Programmes implemented in India since Independence. (6)
Ans. (a) The conventional sources of energy causes environmental pollution therefore the government have introduced the ‘Ujjwala Yojna’ as a game changer for rural India by providing free LPG gas cylinders (cleaner fuel) to rural households. The three conventional fuels targeted under Ujjawala Yojana are:
(I)Agricultural waste and dried dung
(II) Firewood
(III) Coal
(b) The statement is defended as the improvement in the health system in India has been unreasonably slow since independence. Indian health system has been a victim of a relatively low public expenditure. The health expenditure as a percentage of GDP is abysmally low as compared to some of the major developing countries. It stood at around 4.7% of the total GDP in the year 2014-15. Thus, Indian health system needs the increased dose of public expenditure to cure itself.
OR
Poverty Alleviation Programmes are the designated programmes to target reduction in/removal of poverty in a country. India, which inherited poverty from British rule, tried her level best to eradicate poverty through various Poverty Alleviation Programmes over the years. As a result, the percentage of absolute poor in some states has fallen well below the national average of poverty. However, the problems of malnourishment, hunger and illiteracy continue to be a common feature in many parts of India, because of the following reasons:
(i)There has been no radical change in the ownership of assets.
(ii)Due to unequal distribution of land and other assets, benefits from such programmes have been appropriated by the non-poor.
(iii)Inadequate resource allocation for these programmes.
(iv)The Government officials responsible for implementing these programmes were ill motivated and inadequately trained.
To conclude we may say that poverty alleviation programmes were a great step but could not achieve desired results due to improper implementation.
Click here to get the e-book (in pdf format) of CBSE Ten Years (2011-2020)
Comments